Choosing India Over China: Manufacturing, IT, and Services Relocation Trends in 2026

For years, “China+1” meant something fairly simple: keep China at the centre of the supply chain, but add another country as insurance.

In 2026, that formula is changing. For a growing number of multinational companies, India is no longer just the backup factory or low-cost offshore office. It is becoming a strategic second base for electronics manufacturing, engineering, global capability centres, semiconductors and increasingly sophisticated industrial operations.

Tariffs Accelerated the Shift: While diversification was already on the boardroom agenda, trade friction accelerated the timeline. With elevated US tariffs, Section 301 duties, and ongoing geopolitical friction on Chinese electronics, the duty gap between Chinese- and Indian-assembled hardware has made diversification an easy strategic choice.

Apple as the Industrial Bellwether

Apple’s supply chain shift remains the clearest proof point:

• Production Footprint: India’s share of global iPhone manufacturing is on track to hit 25–30%, up from under 10% just a few years ago.
• Domestic Infrastructure: Apple now leverages five major assembly facilities in India (run by Tata Group and Foxconn) backed by a network of roughly 45 local component vendors, giving the ecosystem actual manufacturing depth rather than mere final-assembly optics.

► Beyond phones. The Production-Linked Incentive (PLI) scheme, originally built around electronics, has extended into pharmaceuticals, auto components, textiles, and specialty steel — the mechanism most companies cite when explaining why India rather than Vietnam or Mexico. Most manufacturing sectors now allow 100% foreign ownership via the automatic route, with fast-tracked land, permitting, and recruitment support specifically aimed at companies relocating out of China.

►Semiconductors — the newest leg. As of mid-2026, 13 semiconductor projects across seven states are approved under the India Semiconductor Mission, with cumulative investment above ₹1.6 lakh crore (~$19 billion). While India isn't competing with Taiwan, "India-origin" silicon assembly and testing (OSAT/ATMP) is now a realistic component of global hardware RFPs.

THE FRANCE EXAMPLE: a European playbook in action

This trend extends beyond American Big Tech. French enterprise strategy offers a clear view of how European firms are embedding themselves in India across tech, manufacturing, and aerospace.

At a France-India summit in Nice in June 2026, Commerce Minister Piyush Goyal directly invited French companies to invest, design, and manufacture in India, with both governments targeting a doubling of bilateral trade” from roughly $15.8 billion” within five years. Around 1,000 French companies already operate in India, backed by cumulative FDI of nearly $12.25 billion since 2000.

• IT & Digital Infrastructure: Tech titan Capgemini maintains roughly 175,000 employees in India—over half its global offshore capacity—driving AI, cloud, and enterprise platform integration. In financial services, Société Générale runs major global technology operations out of Bengaluru and Chennai (alongside a new operational unit in GIFT City), while BNP Paribas employs over 14,000 professionals across tech and operational hubs.
• Automotive & Smart Mobility: Automotive supplier Valeo operates a massive software R&D hub in Chennai focused on EV architecture and driving assistance, while the Renault-Nissan Technology Business Centre employs over 10,000 engineers on core vehicle platforms.
• Industrial & Heavy Manufacturing: Schneider Electric treats India as one of its four top global hubs, operating 31 factories—including a designated World Economic Forum "Lighthouse Factory" in Hyderabad. Heavy rail giant Alstom manufactures electric locomotives and metro systems in Bihar and Andhra Pradesh for both domestic transit and export markets.
• Aerospace & Défense: Safran employs over 3,500 people across 18 sites and is constructing a major engine Maintenance, Repair, and Overhaul (MRO) facility in Hyderabad. Meanwhile, Airbus sources over €1 billion annually in local components and is partnering with Tata to assemble C295 military transport aircraft domestically.

THE HONEST CAVEATS

None of this makes India "the next China," and most people close to the trend say so explicitly.

• “This is diversification, not abandonment”. China’s manufacturing infrastructure, deep component integration, and domestic market remain vast. Most multinationals are executing a multi-country production strategy rather than a complete exit.
• “Relocation is slow”. Component ecosystems, tooling, and trained labour take years to build. Many announced "relocations" are phased capacity additions layered on top of, not instead of, existing China operations.
• “India isn't the only winner”. Vietnam has captured a large share of electronics, textiles, and consumer goods manufacturing on labour costs and export agreements. Mexico remains the preferred nearshoring destination for North American supply chains.
• Infrastructure still lags China's”, particularly ports and last-mile logistics, even as industrial corridors and SEZ designations work to close the gap.
• “Results are mixed.” Broader surveys on China-to-elsewhere manufacturing shifts find only about half of companies say their moves fully achieved their original objectives.

THE BOTTOM LINE:

What's different about 2026 versus the China+1 conversations of 2020–2023 is that the shift has stopped being theoretical. “Choosing India” has moved from a hedge to a headline strategy for a meaningful share of global manufacturing and services investment.

The information in this article is for general guidance only and should not be considered professional advice.

Ready to Make India Your Next Growth Market?